Facing economic uncertainty and the increasing costs of higher education, recent college graduates are getting some relief from the federal government.

Last month, the Department of Education introduced a new Pay As You Earn student loan repayment plan, which will cap monthly payments for Federal Direct Student Loans at 10 percent of discretionary income. In addition to reducing monthly loan payments, the program allows graduates to pay off their loan over a 20-year period, rather than the standard 10 years.

“We know many recent graduates are worried about repaying their student loans as our economy continues to recover, and now it’s easier than ever for student borrowers to lower monthly payments and stay on track,” U.S. Secretary of Education Arne Duncan said in a statement.

Changes in student loan policy are sure to affect much of the undergraduate population at U. Michigan. According to the University’s Office of Financial Aid, about 85 percent of resident undergraduates and 55 percent of non-resident undergraduates receive need-based and/or non-need-based financial aid.

Pam Fowler, executive director of the Office of Financial Aid, said this new plan is a step in the right direction but still foresees graduates running into some difficulties. Because the government offers multiple repayment plans, Fowler said some students may find it difficult to determine which repayment plan is best for their financial situation.

On the other hand, many students are unaware of the abundance of loan options available, Fowler said. In some cases, graduates are not getting good information about alternative loan repayment options from the federal servicer who handles their case. As a result students may have issues making their payments in full and on time.

If graduates are not receiving sufficient information from their federal servicers, Fowler suggested they contact the Office of Financial Aid for advice.

Pay As You Earn, which went into effect at the end of last month, will not have any effect on the limit a student can borrow from the federal government. The Office of Financial Aid is responsible for reporting costs of attendance and the maximum amount a student can borrow each year for accuracy in government loan collection.

The new plan will also not affect how the Financial Aid Office operates, Fowler said. The Department of Education will continue to send the office a list of graduates who are late on loan payments, and the Financial Aid Office will try to contact them in order to get them back on track.

Fowler warns that students need to borrow responsibly and ensure that they are able to repay the loan entirely.

“We still have to do a very good job of cautioning students to borrow for needs, not for wants,” Fowler said.

Still, she said Pay As You Earn is a great way to give graduates more relief in paying off their debts.

“Any plan that will keep a student out of default is a good thing, and that is what these plans are designed to do.”